How to Fight the Growing Pains in Zappos’ Holocracy Model

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It sounds like something straight out of King Arthur’s court: Retail leader Zappos spent much of 2015 doing away with management as we know it. Instead of the traditional hierarchy by which most organizations operate, Zappos took on a radical reorganization by getting rid of bosses and moving toward a self-management model.

No more traditional hierarchy. Instead, holocracy puts workers in “circles.” Within a circle, there’s no top dog or little guy; only circles that exist either above or below each other. Anyone within a circle operates on an equal playing ground, while upper circles get the last say in defining expectations and giving responsibilities to lower circles.

Professor Lindred Greer at the Standford Graduate School of Business studies power shifts in teams, and equates the holocracy model to King Arthur’s round table. Each individual knight was given a specific role at the round table, just as each employee is given their specific role in holocracy.

It sounds almost utopian, especially for someone who hates the traditional hierarchy that can make them feel like just another worker bee in their organization. But for all of its idealism, holocracy (and particularly the holocracy at Zappos) has undergone some hefty growing pains as part of the process.

Living in downtown Las Vegas at the early stages of the shift, I was able to hear the feedback from many friends employed by the shoe empire. Despite popular belief cultures, many of them appreciate and depend on the mentorship and direction of their managers. When it comes to this type of sweeping change in management, Zappos might need more than top-notch training to get all of its employees on board.

The Mass Exodus

The change to a holocracy model has not been without its pushback. In fact, after rolling out the new management system–and asking employees to test-drive it for month–Zappos CEO Tony Hseih gave employees a choice: Either commit to the new system, or move on to your next career journey–with a fair severance package.

It’s pretty telling that 210 Zappos employees chose the package and the door. With 15 percent of its workforce gone, it was disheartening to find that another 50 Cloud employees would also choose to leave, bringing the grand total up to 260 employees and 18 percent of Zappos’ workforce gone over the course of one week.

In a yet-unstable job market, one would assume that for 18 percent of any company’s employees to up and leave, the circumstances would have to be dire. The very management model that promotes better efficiency, more self-management, and less hierarchy was the same model that effectively drove employees out by the hundreds.

Bounce and Bubble

Here’s where we see a major reason holocracy was rejected by so many Zapponians (aka Zappos employees): blame it on the shape.

Using the idea of circles may have worked for King Arthur and his round table, but in the high-stakes environment of corporate America, employees like to know where they can pass the buck. The same ideal that promises to help remove the silos that prevent departments working together can cause a “bounce and bubble” effect: Who’s in charge? Where do we bring new ideas? Is this OK?

The other main issue that afflicts Zappos is likely the very question of scalability. We admit that a holocracy within a department or a team could very well inspire better self-management and improved efficiency, but the sheer size of the Zappos workforce makes holocracy harder to grasp. The remaining 1,500 Zappos employees (80 percent of which no longer have a manager) makes for a massive workforce with a lot of autonomy being thrown around. What may have worked on a smaller scale has yet to be proven on a company-wide basis with so many employees.

Improving Employee Buy-In With Learning and Onboarding

We can definitely get behind a company trying to revolutionize its culture and build a way to sustain business for years to come, but we also know that it’s not easy to win the hearts and minds of employees–especially employees that have been doing their job the same way for years.

For a model like holocracy, it’s a matter of “selling” the idea to employees. (Tweet This)

Blended learning (pairing eLearning with instructor-led training) is a great way to both educate employees on the new management philosophy in a personalized, relevant way. Custom eLearning modules would allow Zappos to speak to the individual and specific needs of each circle, generating higher engagement. After employees take their individual trainings, the company could hold an instructor-led session to cover the company wide goals, and also answer any questions employees have on the changes.

If you think of your employees as customers, the idea of “marketing” the change to them through learning becomes clearer. By proving the benefits and using real-life scenarios to demonstrate the feasibility of the switch, employees are more likely to buy in and embrace the change.

Proper on-boarding can help diffuse the growing pains of holocracy. (Tweet This)

If a company plans to do away with traditional hierarchy and management from day one, it’s easier to “mold” employees and set expectations from the start. Instead, Zappos’ need to transition from one management style to another (non) management style is where they’re meeting the most resistance.

Like King Arthur, if Zappos is able to succeed in rolling out and maintaining a holocracy model, it could be the stuff of legends. But it’s an uphill battle. After taking a hefty hit to its workforce and working to prove that holocracy can be a practical solution, Zappos needs to right itself just in time to maintain its impressive 2015 earnings.

Prove that, and it’ll be Zappos’ critics looking for a seat at the round table.


 

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